Senate Unanimously Approves Repeal of SEC Secrecy Provision

For Immediate Release

Contact: 

Keith Rutter
Phone: 202-347-1122
Email: pogo@pogo.org

Senate Unanimously Approves Repeal of SEC Secrecy Provision

WASHINGTON - Yesterday, the Senate unanimously approved a bill, S. 3717, to strike
language from Section 929I of the Dodd-Frank Wall Street Reform and
Consumer Protection Act that would provide the Securities and Exchange
Commission (SEC) with overly broad Freedom of Information Act (FOIA)
exemptions and a blanket authority to withhold records.

“We applaud the Senate for its vote to repeal this unnecessary and
threatening accountability shield for the SEC,” said POGO Executive
Director Danielle Brian. “The champions of this legislation, Senators
Patrick Leahy, D-Vt.; Charles Grassley, R-Iowa; John Cornyn, R-Tex.;
and Ted Kaufman, D-Del., showed real leadership and bipartisanship as
they and their dedicated staff addressed this problematic provision
once it was brought to light.”

Section 929I empowers the SEC to withhold in court cases and in
response to FOIA requests a wide range of records related to its
examinations of regulated entities by enacting a broad privilege
provision and three new blanket exemptions to FOIA. S. 3717 would
repeal 929I, and clarify that an existing FOIA exemption, Exemption 8,
will protect against the release of confidential information contained
in the records of any entity that falls under the SEC’s regulatory
authority. A companion bill, H.R. 6086, has been introduced by House
Oversight and Government Reform Committee Chairman Edolphus Towns,
D-N.Y, and was considered along with Ranking Member Darrell Issa’s,
R-Ca., bill H.R. 5924 in a hearing held by the House Financial Services
Committee last week.

POGO’s Angela Canterbury testified at the hearing where both Chairman
Barney Frank, D-Mass., and SEC Chairman Mary Schapiro agreed that the
SEC secrecy provision is too broad. Chairman Frank further committed to
fixing it legislatively. Canterbury testified that the best fix is to
simply repeal the secrecy provision.

However, the SEC has continued to argue that it needs the ability to
block subpoenas from civil litigants—a solution to a problem the agency
has not shown to exist.

“The
SEC has not provided any evidence that confidential proprietary
information has been made public through civil litigation,” said
Canterbury. “And yet, there is great potential harm to whistleblowers,
defrauded investors, and others who may rely upon and have a right to
information at the SEC if the SEC is given more power to block the
release of this information.”

The SEC issued internal guidance regarding 929I that would give the
agency very broad and unique powers to block subpoenas. POGO also has
learned that the U.S. Chamber of Commerce has been shopping legislative
language that would give the SEC another tool to hide information of
wrongdoing by brokerage firms, hedge funds, financial advisors, and all
other financial entities it regulates—or incompetency by the SEC.

“I am very encouraged by Chairman Frank’s willingness to revisit this
issue and address the problem of secrecy at the SEC,” said Canterbury.
“I hope with his support the House will move swiftly to pass S.
3717/H.R. 6086. We can’t afford for the lights to go out at the SEC
while Congress recesses for the elections."

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The Project On Government Oversight (POGO) is an independent nonprofit that investigates and exposes corruption and other misconduct in order to achieve a more effective, accountable, open and honest federal government.

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